bullwhip effect

1. Bullwhip Effect
 The bullwhip effect is the
magnification of demand
fluctuations, not the magnification of
demand.
 The bullwhip effect is evident in a
supply chain when demand increases
and decreases.

2.  The following all can contribute to
the bullwhip effect:
1-Overreaction to backlogs.
2-Neglecting to order in an attempt to reduce
inventory.
3-No communication up and down the supply
chain.
4-No coordination up and down the supply
chain.
5-Delay times for information and material
flow.

3. 6-Order batching - larger orders result in
more variance. Order batching occurs in
an effort to reduce ordering costs, to take
advantage of transportation economics
such as full truck load economies, and to
benefit from sales incentives. Promotions
often result in forward buying to benefit
more from the lower prices.
7-Shortage gaming: customers order more
than they need during a period of short
supply, hoping that the partial shipments
they receive will be sufficient.

4.  Demand forecast inaccuracies:
everybody in the chain adds a
certain percentage to the demand
estimates. The result is no visibility
of true customer demand.
 Free return policies